Original Story: Freep.com
The City of Detroit and creditor Syncora have reached an agreement, in principle, that would end the bond insurer’s vigorous opposition to the city’s restructuring and turn the company into an ally, reflecting a remarkable breakthrough in the city’s historic bankruptcy case.
The proposed deal — which came on the same day that Detroit and its suburbs struck a deal for a regional water authority — would leave bond insurer Financial Guaranty Insurance Co. (FGIC) and several hedge funds as the last remaining major creditors preventing an amicable resolution of the largest municipal bankruptcy in U.S. history. A Texas Litigation Lawyer is reviewing the details of this case.
Crucially, the deal is contingent on Syncora and the city convincing UBS and Bank of America to release the insurer from certain interest-rate liabilities that are connected to the $1.4-billion pension debt deal Syncora and FGIC insured.
“There is a tentative agreement between Syncora and the City that we believe is an acceptable resolution for all concerned,” Syncora said in a statement. “We have asked that the trial be delayed for 48 hours so that we can work through certain contingencies contained in the deal, including obtaining full resolution with Bank of America, UBS and other stakeholders. We are hopeful the deal will be finalized in the next 48 hours.”
While the breakthrough could delay the trial until Friday, it could ultimately shorten hearings currently scheduled to go into October.
“I think this is the happiest Kevyn Orr has been in some time,” said John Pottow, a professor at the University of Michigan Law School. “This is a big happy night.”
Syncora would get a total of about 26 cents on the dollar when all elements of the deal are included — up from no more than 10 cents under the city’s current proposal, two people familiar with the deal said Syncora is owed hundreds of millions of dollars.
Bankruptcy Judge Steven Rhodes must still approve the deal.
Pottow said he is surprised at how generous the terms of the agreement are, and predicts that Rhodes will take a close look at the agreement and will likely ask his financial expert to review it. A Boston Bankruptcy Lawyer is reviewing the details of this case.
“It sounds like a lot of money to me,” Pottow said. “If I am a feasibility expert, I will want to know how they found all of this extra money.”
A person familiar with the negotiations who spoke on condition of anonymity said terms of the deal would include giving Syncora control of a city parking garage near Grand Circus for 30 years. The deal also includes a 20-year lease extension of operation of the U.S. part of the Detroit-Windsor Tunnel. The insurer currently controls the U.S. side of the tunnel through a contract that expires in 2020.
Syncora owns the company, American Roads, that operates the tunnel on the city’s behalf. Windsor owns and operates the Canadian side of the tunnel. Proceeds from the lease are around $4 million to $5 million a year. The new lease would go through 2040.
Syncora also would receive $23.5 million in cash through so-called B-notes, bonds Detroit had already floated in the bankruptcy, the person said.
Despite the tentative deal, Bank of America and UBS stand in the way.
Syncora won’t agree to settle with Detroit unless the banks release the insurer from its responsibility to cover the banks’ losses on an $85-million deal brokered in the spring to eliminate a costly swaps deal reached by Kwame Kilpatrick’s administration to secure a steady interest rate on a $1.4-billion debt.
The banks were owed nearly $290 million on the swaps but agreed to take significantly less after Rhodes said the swaps were probably illegal.
If the banks don’t agree to end their legal fight against Syncora, Detroit may still face the insurer in court.
“Once again, the swap banks are standing in the way,” one person familiar with the deal said.
The news comes on the same day the city struck a tentative 40-year deal with Macomb, Oakland and Wayne counties to create a regional water authority that will provide $50 million annually to finance badly needed upgrades and help low-income residents avoid water shutoffs. The two deals represent major breakthroughs toward resolving the city’s $18-billion bankruptcy, the largest in U.S. history.
The city has already reached deals with unions and pensioners, leaving FGIC and the hedge funds as the last big creditor holdout in Detroit’s bankruptcy. There are hundreds of small and objectors and creditors.
Syncora would get a long-term lease on the city’s parking garage beneath Grand Circus Park, which could raise significant funds for the bond insurer, but it also must invest $13 million in upgrades. After it invests for repairs, Syncora would keep the proceeds from running the garage but would eventually give Detroit 25% of the profits. Syncora would also get parking bonds worth $21 million.
Syncora also would get $6.2 million in credits toward purchasing city property and buildings that might go up for sale in the coming years, including Joe Louis Arena. Syncora could use the credits to offset the sale price.
The settlements reflect a significant achievement for the largest municipal bankruptcy that was filed on July 18, 2013. Many thought it would take years to settle. A Baton Rouge Bankruptcy Lawyer represents businesses involved in a wide range of bankruptcy cases.
But several days into the city’s historic bankruptcy trial — after which Rhodes will have the power to approve the plan of adjustment — resolving the dispute with Syncora would be a major breakthrough.
The company has been the city’s most vociferous opponent, decrying Orr’s plan to favor retirees over financial creditors and transfer the Detroit Institute of Arts to an independent trust in exchange for outside funding to reduce pension cuts.
In August, Syncora drew Rhodes’ ire by accusing bankruptcy mediators Gerald Rosen and Eugene Driker of “naked favoritism” on behalf of pensioners. The judge is considering sanctions on Syncora’s attorneys. But a deal could help smooth over the differences.
John Roach, spokesman for Mayor Mike Duggan, said the mayor is declining to comment on the bankruptcy process, which is Orr’s responsibility. Orr’s office also refused to comment Tuesday.
Syncora and FGIC insured a $1.4-billion pension obligation certificates of participation deal brokered by Kilpatrick’s administration in 2005 to eliminate the city’s unfunded pension liabilities.A Tulsa Tax Lawyer is reviewing the details of this case.
Doug Bernstein, a bankruptcy attorney and partner with Plunkett Cooney who represents the outside foundations that helped fund the grand bargain to save the DIA and reduce pension cuts said Rhodes will still want to closely evaluate the bankruptcy plan and decide if it will solve the city’s financial issues after the city emerges from bankruptcy.
“The city still has to get past that feasibility hurdle,” Bernstein said. “The biggest remaining hurdle is feasibility.”
FGIC, as the last remaining major creditor objecting to the plan, will have a tougher time arguing against the plan on its own, Bernstein said.
Showing posts with label Boston Bankruptcy Lawyer. Show all posts
Showing posts with label Boston Bankruptcy Lawyer. Show all posts
11 September 2014
23 May 2014
DETROIT MAYOR'S OFFICE: WE WON'T KEEP ORR OR LAW FIRM AFTER TIME'S UP
Original Story: Freep.com
Mayor Mike Duggan's office said Thursday he won't support extending Kevyn Orr's time as the city's emergency manager or keeping on his former law firm, Jones Day, if Detroit's bankruptcy extends beyond Orr's expected exit date in late September. A Tulsa Bankruptcy Lawyer is viewing details of the story.
The issue arose after U.S. Bankruptcy Judge Steven Rhodes questioned Jones Day lawyers during a hearing Thursday, asking what impact a delay in the schedule of the bankruptcy case would have on the high-priced law firm the city hired.
Lawyers for Detroit's financial creditors and for Oakland and Macomb counties tried Thursday to convince Rhodes to delay the case by a month because city lawyers aren't releasing critical documents quickly enough to meet ambitious timetables for this summer's confirmation trial on the plan to exit the nation's largest-ever municipal bankruptcy. A Boston Bankruptcy Lawyer agrees that this makes things difficult.
Rhodes appeared concerned about whether such a delay would push the ultimate resolution of Detroit's bankruptcy beyond the tenure of the state-appointed emergency manager, whose 18-month term is set to end in late September, when city officials have the legal option to vote to fire Orr under Michigan's emergency manager law.
Rhodes asked whether Jones Day, the law firm hired by the city under former Mayor Dave Bing, would stay on after Orr is gone. Greg Shumaker, a Jones Day lawyer, acknowledged that the uncertainty about that matter "could be dramatic." But he told the judge: "We have not talked to the mayor or the City Council about that issue."
"I'm surprised by that," Rhodes said.
He then asked Shumaker whether the goal of ending Detroit's bankruptcy case before Orr leaves sets up deadlines that might conflict with sound practices in bankruptcy court. Shumaker concurred.
Duggan made clear that if the bankruptcy proceedings extend beyond Sept. 25, he won't support keeping Jones Day as the city's law firm in bankruptcy.
"We have no intention of keeping Jones Day," Duggan's spokeswoman and chief of staff, Alexis Wiley, told the Free Press. "We have every intention of running this city, and that means both services and finances."
Wiley declined to discuss how Duggan would handle the bankruptcy after ditching Jones Day, or which lawyers would pick up where the firm left off.
Bill Nowling, a spokesman for Orr, acknowledged there have been no discussions about Jones Day staying on after Orr is gone, noting that Orr and the firm's lawyers have been "operating on the schedule which has the confirmation hearings concluding in August."
Orr, who was working out of the Jones Day office in Washington before coming to Detroit, has said previously that he is not interested in staying in Detroit beyond September. A Lexington Commercial Bankruptcy Attorney said he doesn't blame him.
The confirmation hearings are to determine whether Rhodes approves the city's blueprint for exiting bankruptcy, which has been on a fast-track schedule in large part because Orr's time in Detroit was limited to 18 months. The hearings had been set to begin July 24 and last into August, but a group of financial creditors this week asked Rhodes to push the beginning of the hearings to Aug. 26.
Lawyers for creditors including Syncora -- a bond insurer that's on the hook for nearly $250 million because it guaranteed a disastrous $1.4-billion debt deal meant to shore up underfunded pensions in 2005 -- argued that delays in the city's release of documents creditors have requested make the schedule impossible to follow.
"The city's actions are crippling our efforts," Syncora lawyer Stephen Hackney said during a status conference Thursday.
Creditors' lawyers say that their expert witnesses won't have enough time to analyze and report on city financial assumptions without the delay.
The creditors are seeking access to a number of documents they say the city hasn't released, including reports on the physical condition of Detroit Water and Sewerage Department infrastructure and long-term financial projections for the system, as well as financial background used by consultants such as Milliman, Ernst & Young and Conway MacKenzie, who have advised the city on some matters including restructuring city government and its liabilities and devising a long-term plan to operate Detroit after bankruptcy.
Jones Day lawyer Heather Lennox, representing the city, said that Detroit had already released key documents to the creditors and that the remainder would be handed over by next week. She and other lawyers for the city suggested that the creditors were seeking access to documents in a bid to delay the trial.
Geoff Irwin, also representing the city, said the crush of requests for additional documentation "is becoming incredibly burdensome and unmanageable for the city." A New Orleans Business Bankruptcy Attorney said that they should expect this type of request.
Rhodes didn't immediately rule on the request for the delay, saying he would issue an order soon to address the concerns. But he told lawyers for the city that the creditors are entitled to access a significant number of the documents they're requesting.
How a major shift in legal representation during the endgame of the case would impact Detroit's bankruptcy wasn't immediately clear.
Even if Orr departs before the bankruptcy is settled, under the state's emergency manager law, Public Act 436, Detroit would remain under a financial emergency -- with significant state oversight -- until Gov. Rick Snyder declares the emergency over. That could put pressure on Duggan and the council to accept new agreements to maintain Jones Day's representation in some form.
Snyder's spokeswoman couldn't be reached for comment Thursday.
As of last fall, Jones Day's contract with the city had been approved up to $18 million, among the largest fees charged by lawyers and consulting firms addressing Detroit's financial collapse. .
Mayor Mike Duggan's office said Thursday he won't support extending Kevyn Orr's time as the city's emergency manager or keeping on his former law firm, Jones Day, if Detroit's bankruptcy extends beyond Orr's expected exit date in late September. A Tulsa Bankruptcy Lawyer is viewing details of the story.
The issue arose after U.S. Bankruptcy Judge Steven Rhodes questioned Jones Day lawyers during a hearing Thursday, asking what impact a delay in the schedule of the bankruptcy case would have on the high-priced law firm the city hired.
Lawyers for Detroit's financial creditors and for Oakland and Macomb counties tried Thursday to convince Rhodes to delay the case by a month because city lawyers aren't releasing critical documents quickly enough to meet ambitious timetables for this summer's confirmation trial on the plan to exit the nation's largest-ever municipal bankruptcy. A Boston Bankruptcy Lawyer agrees that this makes things difficult.
Rhodes appeared concerned about whether such a delay would push the ultimate resolution of Detroit's bankruptcy beyond the tenure of the state-appointed emergency manager, whose 18-month term is set to end in late September, when city officials have the legal option to vote to fire Orr under Michigan's emergency manager law.
Rhodes asked whether Jones Day, the law firm hired by the city under former Mayor Dave Bing, would stay on after Orr is gone. Greg Shumaker, a Jones Day lawyer, acknowledged that the uncertainty about that matter "could be dramatic." But he told the judge: "We have not talked to the mayor or the City Council about that issue."
"I'm surprised by that," Rhodes said.
He then asked Shumaker whether the goal of ending Detroit's bankruptcy case before Orr leaves sets up deadlines that might conflict with sound practices in bankruptcy court. Shumaker concurred.
Duggan made clear that if the bankruptcy proceedings extend beyond Sept. 25, he won't support keeping Jones Day as the city's law firm in bankruptcy.
"We have no intention of keeping Jones Day," Duggan's spokeswoman and chief of staff, Alexis Wiley, told the Free Press. "We have every intention of running this city, and that means both services and finances."
Wiley declined to discuss how Duggan would handle the bankruptcy after ditching Jones Day, or which lawyers would pick up where the firm left off.
Bill Nowling, a spokesman for Orr, acknowledged there have been no discussions about Jones Day staying on after Orr is gone, noting that Orr and the firm's lawyers have been "operating on the schedule which has the confirmation hearings concluding in August."
Orr, who was working out of the Jones Day office in Washington before coming to Detroit, has said previously that he is not interested in staying in Detroit beyond September. A Lexington Commercial Bankruptcy Attorney said he doesn't blame him.
The confirmation hearings are to determine whether Rhodes approves the city's blueprint for exiting bankruptcy, which has been on a fast-track schedule in large part because Orr's time in Detroit was limited to 18 months. The hearings had been set to begin July 24 and last into August, but a group of financial creditors this week asked Rhodes to push the beginning of the hearings to Aug. 26.
Lawyers for creditors including Syncora -- a bond insurer that's on the hook for nearly $250 million because it guaranteed a disastrous $1.4-billion debt deal meant to shore up underfunded pensions in 2005 -- argued that delays in the city's release of documents creditors have requested make the schedule impossible to follow.
"The city's actions are crippling our efforts," Syncora lawyer Stephen Hackney said during a status conference Thursday.
Creditors' lawyers say that their expert witnesses won't have enough time to analyze and report on city financial assumptions without the delay.
The creditors are seeking access to a number of documents they say the city hasn't released, including reports on the physical condition of Detroit Water and Sewerage Department infrastructure and long-term financial projections for the system, as well as financial background used by consultants such as Milliman, Ernst & Young and Conway MacKenzie, who have advised the city on some matters including restructuring city government and its liabilities and devising a long-term plan to operate Detroit after bankruptcy.
Jones Day lawyer Heather Lennox, representing the city, said that Detroit had already released key documents to the creditors and that the remainder would be handed over by next week. She and other lawyers for the city suggested that the creditors were seeking access to documents in a bid to delay the trial.
Geoff Irwin, also representing the city, said the crush of requests for additional documentation "is becoming incredibly burdensome and unmanageable for the city." A New Orleans Business Bankruptcy Attorney said that they should expect this type of request.
Rhodes didn't immediately rule on the request for the delay, saying he would issue an order soon to address the concerns. But he told lawyers for the city that the creditors are entitled to access a significant number of the documents they're requesting.
How a major shift in legal representation during the endgame of the case would impact Detroit's bankruptcy wasn't immediately clear.
Even if Orr departs before the bankruptcy is settled, under the state's emergency manager law, Public Act 436, Detroit would remain under a financial emergency -- with significant state oversight -- until Gov. Rick Snyder declares the emergency over. That could put pressure on Duggan and the council to accept new agreements to maintain Jones Day's representation in some form.
Snyder's spokeswoman couldn't be reached for comment Thursday.
As of last fall, Jones Day's contract with the city had been approved up to $18 million, among the largest fees charged by lawyers and consulting firms addressing Detroit's financial collapse. .
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